TaxTMI 
TaxTMI 
2024 (8) TMI 1522
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.... for Assessment Year 2018-19 declaring total income at Rs. 11,66,380/- which was processed under Section 143(1) of the Act on 05.11.2019. In fact, the case was taken up for limited scrutiny and notice under Section 143(2) dated 21.09.2019 followed by notice under Section 142(1) along with detailed questionnaire dated 16.01.2020 and further notice under Section 142(1) of the Act along with specific questionnaire was issued on 28.01.2021. Due compliance was made by the assessee to the said notices by filing submissions to the queries made and upon considering the information, details and/or clarification so filed by the assessee, the returned income was accepted by the Ld. AO and assessment proceeding was finalized under Section 143(3) of the Act on 31.05.2021. 3. Thereafter, a show cause notice dated 12.02.2024 under Section 263 of the Act has been issued by the Ld. PCIT considering the fact that the assessee made investment in the equity shares as reflected from balance sheet but had not deducted any expense related to exempt income. Further that the AO did not disallow any expense related to such exempt income under Section 14A of the Act. The details of assessee's investment i....
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....has been incurred during the said previous year in relation to such income not forming part of the total income." 4. In view of the above Explanation, the assessee was required to disallow expenses relating to exempt income as per the rule 8D as under: - Investment at the beginning of year Rs 112,68,34,600 Investment at the end of the year Rs 112,79,18,600 Average investment during the year Rs 112,73,76,600 Amount to be disallowed as per under 14A 1% of the average investment of Rs. 1,12,73,766" 5. In that view of the matter the assessee was directed to explain as to why proceeding under Section 263 should not be initiated for revision of assessment order for Assessment Year 2018-19 and as to why the income should not be enhanced by Rs. 1,12,73,766/- on account of failure of the AO to disallow these expenses. 6. The Ld. Counsel appearing for the assessee joins issue here. At the very threshold, it was submitted by him that the assessee does not have any exempt income. Further that during the course of assessment proceeding, notice under Section 142(1) of the Act was issued on 16.01.2020 wherein applicability of Section 14A has been directed to....
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.... which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." 9. In this regard, he has relied upon the judgment passed by the Hon'ble Delhi High Court in the case of PCIT Vs. Era Infrastructure India Ltd., reported in (2022) 141 taxman.com 289 (Del) wherein it has been held that up to and including Assessment Year 2021-22 no disallowance could be made under Section 14A if no exempt income is earned by an assessee. Further that amendment made by the Finance Act, 2022 to Section 14A by inserting a non-obstante clause and explanation will take effect from 01.04.2022 and cannot be presumed to have retrospective effect. In that view of the matter since the issue involved in the order impugned passed under Section 263 of the Act i.e non disallowance of expenses relating to exe....
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....s to be fumished online electronically in E Proceeding facility through your account in 'e-filing' website of Income Tax Department d) Para(s) (a) to (c) are applicable if you have an account in e filing website of Income Tax Department Till such an account is created by you, assessment proceedings shall be camed out either through your e-mail account or manually (if e-mail is not available). e) In cases where order has to be passed under section 153A/153C of the Income Tax Act, 1961 read with section 143(3), assessment proceedings would be conducted manually Yours faithfully, SATHISH G CENTRAL CIRCLE 3, DELHI ANNEXURE Please refer to your Return of Income filed for the A.Y. 2018-19. In this connection you are requested to fumish the following details / information to substantiate your income and justify the expenses debited in the P&L account financial year relevant to this assessment year 1. Please provide details of interest expenses made during the year and explain whether these expenses are attributable to investments made by the company. 1.1. Please provide details of source of above investment....
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....furnish the details of any income tax demand stands pending against your name 11. Please furnish all the details regarding properties/premises/assets held by the company in given format : - Location and address of the property Purchased/inherited Usage of the property Fair market value of the said Wealth tax, if paid 1 2 3 4 5 12. Furnish details of your Income-tax assessments for the earlier 2 years in following format, if scrutinized accordingly. A.Y. Income returned Income assessed Nature of addition Amount of addition Result of 1st appeal Result of 2nd appeal Arrears due 11. Further that upon perusal of the reply reflecting at pages 44 to 47 of the paper book filed before us which was furnished before the Ld. DCIT in accordance with notice issued under Section 142(1) dated 16.01.2020 we find that the assessee has taken the trouble in explaining the issue with calculation and further took the support of different judicial pronouncements from different forums in favour of the assessee in the following manner: Date: 14.04.2021 The Dy. Commissioner of Income Tax, Centre Circle -3 ....
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....1961 is called for Principal Commissioner of Income tax, Patiala v State Bank of Patiala [2018] 99 taxmann.com 286 (SC); Maxopp Investment Ltd v/s CIT [402 ITR 640 (SC)] PCIT v. GVK Project and Technical Services Ltd [(2019) 106 taxmann.com 181(SC)]; Commissioner of Income Tax (II), Kanpur vs Shivam Motors Pvt Ltd in ITA No. 88 of 2014 for A/Y 2008-09 vide order dated 05-05-2014 (Allahabad High Court); CIT vs Corrtech Energy Pvt Ltd [(2014) 223 Taxman 130(Guj)], CIT vs Holcim India (P) Ltd in ITA Nos. 486/2014 and 299/2014 vide order dated 05 September, 2014 (Delhi High Court); Commissioner of Income-tax, Faridabad vs. Lakhani Marketing Inc. [(2014) 226 Taxman 45 (Punjab & Haryana)] In view of the above discussion and ruling of Hon'ble Supreme Court, it is submitted that in the absence of any exempt income no disallowance can be made under section 14A read with Rule 8D of the Income tax Act 1961 1.3 As regard Your Honour's query regarding expenses debited to Profit and Loss Account for earning exempt income, it is submitted that there is no exempt income earned during the relevant Assessment ye....
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....tails of shareholders with their shareholding pattern for the relevant Assessment Year is enclosed herewith 10. As regard your Honour's query regarding details of income tax demand. It is submitted that demand of Rs 2287 is due for the Assessment year 2010-11 11. As regard Your Honour's query regarding properties/ premises/ assets held by the company, it is submitted that the Assesssee Company has not held any properties/ premises/ assets as on 31.03.2018. 12. As desired, details of Income tax Assessments for the earlier 2 years in the prescribed format is enclosed herewith. Hope Your Honour's would find the above in order and proceed to frame the Assessment accordingly." 12. When sufficient explanation has been given by the assessee to the specific queries made by the Assessing Officer in regard to the similar proposal made by the Ld. PCIT in the order impugned under Section 263 of the Act, i.e the issue of disallowance of expenses under Section 14A of the Act and only thereafter, the assessment has been finalized, such inquiry and verification made by the Ld. AO cannot be said to be insufficient and issuance of order und....
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....tements which were filed before the Assessing Officer as well. We also find that the free reserves were also more than sufficient to cover up the investment in fixed assets/capital work in progress. Further the assessee society has generated sufficient internal cash flows to meet with the cost of fixed assets as well as capital work in progress. In spite of this fact the assessee has capitalized a sum of Rs. 7.09 crores in the books of accounts. The learned Pr. CIT has also not disputed that the total investments were merely 10% of the interest-free funds available with the assessee society. We also find that a consistent view has taken by all the judicial authorities that in the event of availability of interest-free funds a presumption would be that investments would be out of interest assessee. In this respect, reliance was placed on the decision of the Bombay High Court in the case of CIT v. Reliance Utility and Power Ltd. 313 ITR 340. 16.1 In light of the above discussions as well as factual matrix, we have no hesitation in holding that the order passed by the learned Pr CIT is bad in law for the following reasons. (a) That, as discussed above, detailed inqui....
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....orically decided that amendment by Finance Act, 2022 to Section 14A by inserting a non-obstante clause and Explanation will take effect from 01.04.2022 and the same cannot be presumed to have retrospective effect. Thus, having regard to the entire aspect of matter we find that the issue raised and decided by the Ld. PCIT in the order impugned under Section 263 of the Act has already been enquired and examined/verified by the Ld. AO during the course of assessment proceedings and only upon which the assessment proceedings has been finalized upon accepting return. 15. The assessment order cannot be held to be erroneous insofar as it is prejudicial to the interest of the revenue. In fact, Section 263 of the Act, admittedly, empowers the jurisdictional Commissioner of Income-tax tax to call for and examine the record of any proceedings under the Act, and if he considers that any order passed therein by the Assessing Officer is 'erroneous in so far as it is prejudicial to the interests of the revenue to pass such orders thereon as the circumstances of the case may justify including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh a....